The Bizarre Business of the Masters: Handshake Deals and America's Greatest Sporting Event

The business of the Masters is shrouded in secrecy. Why the tournament is so resistant to change, and why it's sport's greatest event.

The Masters is a golf tournament unlike any other. Leader boards are left up across the year. There are no ugly cart paths to break up the flow of one fairway to the next. Cheese and pimento sandwiches still sell for $1.50 in food tents throughout the course. There's no gouging of patrons when it comes to parking; that's free. Also, don't plan on bringing a camera or cell phone into the tournament; those are strictly banned.

Everything about the tournament is centered on being the ultimate experience for golf purists, both for spectators and viewers on television. It's hard to imagine a sporting event with such a consistently excellent product and rich history.

The Masters is a sanctuary of golf, steeped in traditions that often seem antiquated. With the Masters, change is slow, and the club has doggedly fought against changes embraced by nearly all major sporting events around the world during the past 30 years. Last year, the club famously and finally allowed women to join, following years of protests.

Source: Wikipedia Commons.

Let's look at the business of the Masters and how it has managed to thrive while eschewing many of the tie-ins that define today's big-money sports world.

Less money, better experienceBusinessweek featured a profile of the Masters' partnerships with both television partners, CBS and Disney(NYSE:DIS), in this week's magazine. Businessweek quotes Pat Summerall's memoir, which notes that CBS has been on a one-year contract with the Masters since 1956 with no formal written contract. Instead, the two parties have a handshake deal with a known list of areas CBS couldn't discuss, such as the tournament's prize money.

You see, winning the Masters is about much more than money. It's about tradition and joining the small group of champions in the most elite winner's circle in golf.

The Businessweek profile goes into more depth and is a good read. If you've ever watched the Masters on TV, it's impossible not to note the lack of commercials interrupting programming every 10 minutes. Instead, the Masters has only three sponsors -- AT&T, IBM, and ExxonMobil -- which split four minutes of commercial time.

The Masters could seek more than double the money it currently collects from CBS if it would expand commercial coverage. Instead, it asks CBS how much it'll need to cover its costs televising the tournament -- with a little profit kicked in -- and then the three sponsors split the cost to pay CBS.

It's not about the money more commercials could bring in; it's about providing a telecast that has no peer.

An experience unlike any otherAt each step of the way, we have an organization without any mandate for profit maximization that defines business across America. Because the Masters is solely focused on an experience, it continues to stand out more with each passing year.

The Super Bowl can add more expensive and elaborate halftime shows. It can add stadiums filled with 100,000 fans paying four-figure amounts for their tickets. It stands as a contrast to the Masters -- the most successful commercial enterprise in sports versus the most traditional one.

Yet with legal troubles hounding the NFL, you have to fear that it's a product with uncertain days ahead. From the looks of the Masters' handshake agreement with CBS, it seems a focus on legal matters doesn't seem to be something on the club's mind.

The Masters is a throwback, antiquated in most every way. Some of its decisions understandably have their detractors, such as its aforementioned previous stance of not allowing female members.

Yet if I had a way to bet which one of sport's spectacles of today would not only survive 100 years from now but still be thriving, the Masters would be my odds-on favorite, even if spectators have to leave their Google Goggles in their hovercar before entering the course.

An opportunity to be remarkableThe Masters is succeeding because it offers a unique product that moves in the opposite direction of sports. Television and stadium money flowing into sports has meant better coverage of sports, but it also has its downsides. More television money means concessions to advertisers.

The Masters zigs where others zag, and the premium experience it offers stands out that much more every year. None of this is to say that other sports are wrong to chase more and more sponsorship and advertising dollars; better coverage has brought in more viewers and increased the value of teams several times over. It's ordinary for sports leagues to chase bigger deals. The Masters is remarkable not for the amount of money it makes, but for the quality of its product.

No for-profit business could behave exactly like The Masters, but there are some parallels to be observed. For example, a company like Whole Foods has succeeded because it offered a more pleasing and high-end food shopping experience while the rest of the industry competed endlessly on price. It succeeded because it was offering something unique and premium that consumers desired. Like the Masters, the success of Whole Foods was based in how remarkable it was -- how uncommon and extraordinary compared with its peers.

The difference between Whole Foods and the Masters? Once Whole Foods succeeded, there was a rush of companies trying to copy it. When the iPhone hit, Android soon followed. Business is extraordinary in how quickly great ideas can be copied. These ideas are copied, because they're making wheelbarrows full of money.

Yet no one is copying the idea of the Masters, because its advantage in sports is that it harks back to tradition and a purity of the game, and that's something that little extra money comes with.

With each passing year, the Masters just becomes more peerless and remarkable.

Author

Eric started at The Motley Fool in 2008 working in the Tech & Telecom sector. Today, he's the General Manager of Fool.com. You can follow him on Twitter to stay up to date with his tech industry analysis. Follow @bleekertech